Arizona Adjuster Practice Exam

What type of contract provides one party significantly more than the other?

1. Unilateral contract

2. Multilateral contract

3. Aleatory contract

4. Bilateral contract

The correct answer is: Aleatory contract

An aleatory contract is a type of contract where the obligations of the parties depend on the occurrence of a specific event, and the outcomes can be quite unequal. In these contracts, one party often stands to gain significantly more than the other, depending on how the event plays out. For example, in an insurance policy, the insurer may collect a relatively small premium while potentially paying out a much larger sum if a covered event occurs, creating a situation where the benefits are disproportionately distributed. In contrast, other types of contracts like unilateral or bilateral contracts usually involve a more balanced exchange of obligations and benefits. A unilateral contract involves one party making a promise in exchange for performance, while a bilateral contract involves mutual promises where each party is bound to fulfill their obligations. A multilateral contract is a more complex arrangement involving three or more parties, but again, these contracts tend not to exhibit the significant imbalance in benefits that is characteristic of an aleatory contract.